Ryanair announced record net profits of €401 million, a 33% increase over the prior year figure and €11 million ahead of previous guidance. Ryanair’s traffic grew by 22% to 42.5 million, yields rose 7%, as revenues grew by 32% to €2.24 billion.
Unit costs increased by 9% mainly due to a 50% increase in fuel costs. Despite this significantly higher fuel bill, Ryanair maintained an industry leading after tax margin of 18%. Higher ticket prices, baggage charges and the sale of travel extras, including insurance boosted revenue. Profit this year will rise only about 5%, with losses in the second half of the year, as yields, or average ticket prices, drop 5% because of weakening demand, the airline said.
Ryanair also said that it will buy back approximately €300 million of shares starting June 7th. Ryanair’s CEO Michael O’Leary said: „These record profits and the strong growth in traffic, yields and revenues during a period of much higher oil prices and intense competition is a tribute to the strength of Ryanair’s lowest fare model. The highlights of the past year include: Profit growth of 33% to €401 million - Up €100 million on last year. Traffic growth of 22% to 42 million. Purchase of 30 new aircraft, bringing the fleet to 133 units at year end. Opening 153 new routes (including 3 new bases at Marseille, Madrid and Bremen).
Fuel costs increased by 50% to €693 million. Industry leading customer service and No.1 for pricing and punctuality. Widened the price gap between Ryanair and our competitors. Purchased 25.2% of Aer Lingus Plc. Strengthened the balance sheet with year end cash of €2.2 billion. The unusual feature of these results was the 7% rise in average fares, despite the 22% growth in traffic. This increase was largely driven by competitor fare increases and competitor fuel surcharges, as well as our checked baggage fees which are designed to encourage passengers to travel with carry-on luggage only.
Ancillary Revenues grew by 40% thanks to a better passenger spend, increased penetration, and the growth of excess baggage revenues. In March we announced an agreement with Expedia, our new hotel provider, and we expect that ancillary revenues will continue to grow at a faster rate than scheduled traffic. Due primarily to a 50% increase in fuel costs, unit costs rose by 9%. This was also impacted by a one off step up in our pilot crewing ratio due to longer sector lengths. We took advantage of recent dollar and oil price weaknesses to extend our fuel hedges to 90% for the remainder of fiscal 2008 at an average cost per barrel which is 10% lower than last year.
This cost saving will help us to offset significantly higher airport charges this year at Stansted (where airport charges doubled on 1 April), and Dublin Airport, who continue to impose unjustified price increases despite delivering a sub-standard service through a portacabin facility. These monopoly price increases demonstrate again the abject failure of Aviation Regulators in both Ireland and the UK to protect the interests of consumers. We continue to press for the break-up of the BAA airport monopoly and welcome the recent OFT and Competition Commission investigation of the BAA.
The current BAA Stansted plan to waste almost £4 billion building a second runway and terminal (which should cost less than £1 billion) provides further proof of this monopoly abuse. Similarly at Dublin, Ryanair opposes the ludicrous plans to waste over €800 million building a 15 MPPA passenger terminal which Ryanair is willing to build (and pay for) at a cost of less than €200 million. The Irish Regulator has failed to investigate or explain why the DAA’s costs of this facility have quadrupled over the past year without any increase in capacity. His current proposal that Ryanair passengers who will never use T2 should pay higher airport charges to fund it, is contrary to the „User Pays” principle of aviation regulation.
The significant cost increases associated with these higher airport charges at tansted and Dublin since April, combined with Gordon Brown’s decision to engage in „highway robbery” by doubling UK airport departure taxes has had a negative impact on traffic and yields.” Ryanair said that forward bookings and yields continue to be soft and it continues to respond with aggressive price promotions including a current offer of £20 off all return fares on all flights. Ryanair has recently extended this price war by launching a unique „lowest price” guarantee. Subject to the terms and conditions of this program, Ryanair will refund double the difference to any passenger who can find a lower fare from any competitor airline on any Ryanair route. Thus far it says that it has paid remarkably few claims, simply because no other airline can match Ryanair’s low fares. (finfacts.com)